Worried About Your Financial Health? It May Be Time For A Checkup


When was the last time you gave yourself a financial checkup? As the saying goes, there’s no time like the present. This is especially true when it comes to reviewing the current state of your finances and figuring out what you need to do to get – or stay – on track so you can pursue your financial goals. To do this requires you to take into account a variety of factors. Setting aside time to understand your financial condition and conduct an honest assessment of where you stand is a great way to get started. Before you jump right in, consider these seven steps that you can take to assist you in evaluating where you stand financially and to help you determine a reasonable course of action to plan for the future.

STEP 1: Evaluate Your Net Income, Income Sources, and Review Your Spending Habits

Do you know your net income? After all the benefits, social security, and taxes are deducted from your paycheck; you are left with your net income. This can be an eye-opener for some people. Say somebody gets hired at $60,000 per year. You will not be bringing $60,000 home. Hypothetically speaking, if you live in South Carolina, you pay federal income taxes, state income taxes, social security, and Medicare which amounts to over $14,200. That $60,000 just became a little more than $45,500.

Don’t forget: you also have to consider how much you pay for health insurance, vision, dental, and possibly life insurance if you have it. Knowing your net income is important because you have to be aware of how much money you bring in (income source) and, conversely, how much is going out. There are monthly bills, food, gas, entertainment, childcare, and more.

STEP 2: Recognize How Rising Inflation and Interest Rates Will Affect You

The inflation rate has not been this high in nearly half a century. Interest rates are also rising. Because the cost of living is noticeably going up, there are a few things you can do to soften the burden on your wallet. Understanding your daily, weekly, and monthly spending habits and sticking to a budget may help you better manage your financial situation while you adjust to current inflation and interest rates.

According to a survey by The Penny Hoarder, over 55 percent of Americans do not use a budget to manage their income, and 56 percent of respondents said they didn’t know how much money they spent last month. [I] That is a big difference. Here are a few tricks to help you manage your money and your spending habits:

  • Review your account statements and list the amount of money coming in.
  • List the weekly and monthly expenses, including groceries, gas, entertainment, debts owed, and bills. Money can seemingly disappear if you are not taking account of your expenses, if you are not spending wisely, or if you are spending more than you are earning.
  • If extra money is in your bank account, consider saving and investing it.
  • In today’s technologically advanced world, there are even “apps” available that can be uploaded to help you monitor your spending and offer budgeting tips.
  • Work on eliminating unnecessary expenses. Be honest with yourself about where the money is going.
  • Consult with a financial professional to help you develop a financial plan that is appropriate for you and your specific situation.

STEP 3: Consider Investing

Investing is a way of taking money that you have saved and potentially growing your wealth over time. It is essential to understand the value of careful and knowledgeable investing instead of keeping your cash locked up solely in bank accounts that typically generate minimal returns and is tempting to spend. The real benefit of investing is the preservation and growth of your wealth. There are a few ways that you can invest. Having a diversified portfolio, especially in an unpredictable market, is wise in case one segment of the market falls harder than other industries. A few ways to invest include:

  • Stocks – Buying stock is having ownership in a company. When you purchase, say, five shares of Amazon stock, you have now become a partial owner of Amazon, and if they do well and the stock increases, meaning it is worth more than when you bought it, and you sell it, you just made money which is called capital gains (though it is recommended to hold stocks with the intention of being a long-term investment. Day trading, buying and selling, hoping stocks go up and selling for small profits is extremely risky!). There are a variety of different stocks that you can buy including common, preferred, domestic, international, penny, and more. [ii]
  • Mutual Funds – A mutual fund is an investment company that pools the money of many investors together and invests the money in different assets, including stocks, bonds, real estate, and more. Each mutual fund consists of multiple companies. As an investor, you buy shares in the mutual fund, meaning that you are buying ownership in multiple companies compared to a stock that is one company. This type of investment generates income in two ways; one of them is through capital gains which, again, means that the value (the price) of the shares increases compared to the price you bought them. If you sell it when it is higher than when you purchased it, you make money. The second way is through dividends. Dividends are distributions of a company’s earnings to its shareholders. [iii]
  • Retirement Accounts – These are savings accounts with tax advantages that focus on long-term investing and saving. They can be either through your place of employment or personal. A few types include 401(k), Roth IRA, Traditional IRA, SEP IRA, Simple IRA and Simple 401(k), a Solo 401(k), and more. [iv]
  • Other Ways to InvestBonds, Education Accounts, Exchange-Traded Funds, Custodial Accounts, Real Estate, and more.

STEP 4: Saving Enough Money for Emergencies in a Volatile Market

There is always the possibility of an unexpected financial emergency, whether a medical bill, car issue, income loss, or other unforeseen challenges. Setting up an emergency fund is essential to prepare yourself for financial obstacles. The general rule of thumb is to keep enough money in your savings account to cover three to six months’ expenses. [v]

STEP 5: Pay Down Your Debt

If you live an average life, it seems that accumulating some debt, whether a home mortgage, a car, or a personal loan, is just part of the equation. Some days it might seem like trying to climb Mount Everest in flip-flops, but there are techniques you can try that might help you gradually get ahead of the debt. These techniques include:

  • Debt Avalanche Method
    • You make the minimum payment on each account where you owe money but pay as much as possible to the one with the highest interest rate until it gets paid off. Then you apply this method with the second highest interest rate, and so on.
  • Debt Snowball Method
    • You pay off the smallest balance first and then work up to the largest.

STEP 6: Keep Track of Your Credit Score

A solid credit score is essential in pursuing your financial goals. Many people do not regularly monitor their credit or even know what their current credit score is, but making regular payments on accounts you owe has the potential to impact it tremendously. If possible, you want to try and pay off any credit card or personal loan balances in full. Stay on top of it, even if you cannot pay in full at this moment in time.

STEP 7: Work With a Financial Professional

Trying to manage your finances and complete everything involved on your own can potentially be overwhelming. The hassle of collecting and organizing your financial information can be a nightmare by itself. Having an experienced financial professional in your corner may help you navigate the complexities of financial planning and you can work together to avoid mistakes that could cost you in the long term. Take the time to research and consult with a financial professional so you can start planning today for you and your family’s future.

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Important Disclosures:

[i] These Budgeting Statistics Show Most of Us Don’t Track Our Spending (thepennyhoarder.com)

[ii] Types of Stocks: Understanding the Different Categories (fool.com)

[iii] Mutual Funds and ETFs (sec.gov)

[iv] Types of Retirement Plans | Internal Revenue Service (irs.gov)

[v] An essential guide to building an emergency fund | Consumer Financial Protection Bureau (consumerfinance.gov)


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Stock investing includes risks, including fluctuating prices and loss of principal.

Investing in mutual funds involves risk, including possible loss of principal. Fund value will fluctuate with market conditions and it may not achieve its investment objective.

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